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Commitments And Contingencies
12 Months Ended
Dec. 31, 2014
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

(9) COMMITMENTS AND CONTINGENCIES

Operating Commitments and Contingencies

The Company has commitments to third parties for demand transportation charges. As of December 31, 2014, future payments under non-cancelable firm transportation charges are approximately $478 million in 2015, $515 million in 2016, $543 million in 2017, $549 million in 2018, $502 million in 2019 and $2,802 million thereafter. 

The Company has 11 leases for pressure pumping equipment for its E&P operations under leases that expire between December 2017 and January 2018.  The Company’s current aggregate annual payment under the leases is approximately $8 million.  The Company has 7 leases for drilling rigs for its E&P operations that expire in 2020. The Company’s current aggregate payment under the leases is approximately $13 million. The lease payments for the pressure pumping equipment, as well as other operating expenses for the Company’s drilling operations, are capitalized to natural gas and oil properties and are partially offset by billings to third-party working interest owners for their share of fracture stage charges.

The Company leases compressors, aircraft, vehicles, office space and equipment under non-cancelable operating leases expiring through 2027.  As of December 31, 2014, future minimum payments under these non-cancelable leases accounted for as operating leases are approximately $73 million in 2015, $62 million in 2016, $45 million in 2017, $25 million in 2018, $21 million in 2019 and $45 million thereafter. The Company also has commitments for compression services related to its Midstream Services and E&P segments. As of December 31, 2014, future minimum payments under these non-cancelable agreements are approximately $41 million in 2015, $28 million in 2016, $19 million in 2017, $10 million in 2018, and $4 million in 2019.

In response to its well performance, the Company entered into new and amended natural gas transportation and gathering arrangements with third party pipelines during the second quarter of 2013 in support of its production in Northeast Appalachia. As of December 31, 2014, the Company’s obligations for demand and similar charges under the firm transportation agreements and gathering agreements totaled approximately $5.4 billion and it has guarantee obligations of up to $173 million of that amount.

In 2013, the Company started construction on a corporate office complex located in Spring, Texas on 26 acres of commercial land that it purchased in 2012.  The Company financed the construction of this complex through a construction agreement and lease arrangement.  As of December 31, 2014, the Company was obligated for the construction costs incurred, which approximated $137 million. In January 2015, construction on the corporate campus was completed and the Company commenced a lease with a term of approximately five years.

In the first quarter of 2010, the Company was awarded exclusive licenses by the Province of New Brunswick in Canada to conduct an exploration program covering approximately 2.5 million acres in the province. The licenses require the Company to make certain capital investments in New Brunswick of approximately $47 million Canadian dollars in the aggregate over the license periods. In order to obtain the licenses, the Company provided promissory notes payable on demand to the Minister of Finance of the Province of New Brunswick with an aggregate principal amount of $45 million Canadian dollars. The promissory notes secure the Company's capital expenditure obligations under the licenses and are returnable to the Company to the extent the Company performs such obligations. If the Company fails to fully perform, the Minister of Finance may retain a portion of the applicable promissory notes in an amount equal to any deficiency. The Company commenced its Canada exploration program in 2010 and, as of December 31, 2014 has invested $45 million Canadian dollars, or $44 million USD, in New Brunswick towards the Company’s commitment, fully covering the promissory notes held by the Province of New Brunswick. No liability has been recognized in connection with the promissory notes due to the Company’s investments in New Brunswick as of December 31, 2014 and its future investment plans. Our licenses are scheduled to expire in March 2015. The newly elected provincial government in New Brunswick has announced an intent to impose a moratorium on hydraulic fracturing until a list of conditions is met and has introduced authorizing legislation in the provincial legislature. The Company has applied for an extension of its licenses past the end of the moratorium, but as of this time that extension has not been granted. The list of conditions that the provincial government has announced is subjective, and the Company cannot predict the duration of the moratorium or whether it will be granted the extension requested or any other extension. Unless and until the moratorium is lifted and the Company’s licenses are extended, it will not be able to continue with its program in New Brunswick. If this extension is not granted, the Company  may be required to write off its investment.

Environmental Risk

The Company is subject to laws and regulations relating to the protection of the environment. Environmental and cleanup related costs of a non-capital nature are accrued when it is both probable that a liability has been incurred and when the amount can be reasonably estimated. Management believes any future remediation or other compliance related costs will not have a material effect on the financial position or results of operations of the Company.

Litigation

Tovah Energy

In February 2009, one of the Company’s subsidiaries was added as a defendant in a case then styled Tovah Energy, LLC and Toby Berry-Helfand v. David Michael Grimes, et al., pending in the 273rd District Court in Shelby County, Texas.  By the time of trial in December 2010, Ms. Berry-Helfand  (the only remaining plaintiff) alleged that, in 2005, she provided the Company’s subsidiary with proprietary data regarding two prospects in the James Lime formation pursuant to a confidentiality agreement and that the Company’s subsidiary refused to return the proprietary data to the plaintiff, subsequently acquired leases based upon such proprietary data and profited therefrom.  Among other things, she alleged various statutory and common law claims, including, but not limited to, claims of misappropriation of trade secrets, violation of the Texas Theft Liability Act, breach of fiduciary duty and confidential relationships, various fraud based claims and breach of contract, including a claim of breach of a purported right of first refusal on all interests acquired by the Company’s subsidiary between February 2005 and February 2006.  She also sought disgorgement of the Company’s subsidiary’s profits.  A former associate of the plaintiff intervened in the matter claiming to have helped develop the prospect years earlier.

The jury found in favor of the plaintiff and the intervenor with respect to all of the statutory and common law claims and awarded $11 million in compensatory damages but no special, punitive or other damages. Separately, the jury determined that the Company’s subsidiary’s profits for purposes of disgorgement, if ordered as a remedy, were $382 million.  (Disgorgement of profits is an equitable remedy determined by the judge, and it is within the judge’s discretion to award none, some or all of unlawfully obtained profits.)   In August 2011, a judgment was entered pursuant to which the plaintiff and the intervenor were entitled to recover approximately $11 million in actual damages and approximately $24 million in disgorgement as well as prejudgment interest and attorneys’ fees, which currently are estimated to be up to $9 million, and all costs of court of the plaintiff and intervenor.

Both sides appealed and in July 2013, the Tyler Court of Appeals ordered that (1) the judgment awarding the plaintiff and the intervenor $24 million as disgorgement of illicit gains be reversed and judgment rendered that they take nothing, (2) the award of $11 million for actual damages, insofar as it is based on the jury’s findings of breach of fiduciary duty, fraud, breach of contract, and theft of trade secret is reversed and judgment rendered that the plaintiff and the intervenor take nothing under those theories of recovery, (3) the award of $11 million to the plaintiff and the intervenor as damages for misappropriation of trade secret is affirmed, (4) the case be remanded to the trial court for a determination and award of attorney’s fees for the Company’s subsidiary as the prevailing party under the Texas Theft Liability Act, and (5) in all other respects, the judgment is affirmed.  All parties petitioned for rehearing.  The Tyler Court of Appeals denied rehearing in November 2013. 

The Company’s subsidiary filed a petition for review in the Supreme Court of Texas in February 2014.  The plaintiff and the intervenor filed cross petition for review in April 2014, but conditioned their filing on the courts granting the Company’s subsidiary petition for review; i.e., if the court denies the Company’s subsidiary’s petition for review, then the plantiff and the intervenor are not seeking further review of the court of appeals’ judgment. On October 24, 2014, the Supreme Court requested full briefing on the merits of the case. Based on the Company’s understanding and judgment of the facts and merits of this case, including appellate matters, and after considering the advice of counsel, the Company has determined that, although reasonably possible, a materially adverse final outcome to this action is not probable.  As such, the Company has not accrued any amounts with respect to this action.  If the Supreme Court declines to rule on the case or affirms all aspects of the court of appeals’ judgment then the Company’s subsidiary would owe the $11 million in damages, plus interest and attorneys fees, offset by any award of attorneys’ fees for its prevailing on the theft count. The Company’s assessment may change in the future due to occurrence of certain events, such as the result of the petitions for review at the Supreme Court of Texas, and such a re-assessment could lead to the determination that the potential liability is probable and could be material to the Company’s results of operations, financial position or cash flows.

 

Arkansas Royalty Litigation 

The Company is a defendant in three cases, two filed in Arkansas state court in 2010 and 2013 and one in federal court in 2014, on behalf of putative classes of royalty owners on some of its leases located in Arkansas. The chief complaint in all three cases is that the Company underpaid the royalty owners by, among other things, deducting from royalty payments costs for gathering, transportation, and compression of natural gas in excess of what is permitted by the relevant leases. The Company removed the two cases filed in state court to federal court, but both were remanded to state court during the third quarter of 2014; the appeal of those remand orders is ongoing. Despite the ongoing appeal of the remand, in September and October 2014 the judges in the two Arkansas state actions entered orders certifying classes of royalty owners who are citizens of Arkansas. The Company is appealing those orders. Discovery regarding the plantiffs’ theories of liability and amount of claimed damages is in the very early stages. Management believes that the deductions from royalty payments as calculated are permitted and intends to defend the cases vigorously. The Company’s assessment may change in the future due to the occurrence of certain events, such as adverse judgments, and such a re-assessment could lead to the determination that the potential liability is probable and could be material to the Company’s results of operations, financial position or cash flows.

Other

The Company is subject to various litigation, claims and proceedings that have arisen in the ordinary course of business, such as for alleged breaches of contract, miscalculation of royalties and pollution, contamination or nuisance. Management believes that such litigation, claims and proceedings, individually or in aggregate and after taking into account insurance, are not likely to have a material adverse impact on the Company’s financial position, results of operations or cash flows.  Many of these matters are in early stages, so the allegations and the damage theories have not been fully developed, and all subject to inherent uncertainties; therefore, management’s view may change in the future. If an unfavorable final outcome were to occur, there exists the possibility of a material impact on the Company’s financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated.

Indemnifications

The Company provides certain indemnifications in relation to dispositions of assets.  These indemnifications typically relate to disputes, litigation or tax matters existing at the date of disposition. No liability has been recognized in connection with these indemnifications.